Obama’s Politically Impossible Transpo Plan Is Just What America Needs

Even with a tax on oil, the U.S.'s effective gas tax rate would be the lowest in the industrialized world. Graph: Tony Dutzik via FHWA
Even with a tax on oil, the U.S.’s effective gas tax rate would be the lowest in the industrialized world. Graph: Tony Dutzik via FHWA

It may be “seven years too late,” as tactical urbanist Mike Lydon put it, but President Obama has released a transportation proposal that calls for big shifts in the country’s spending priorities.

Obama’s proposal would generate $30 billion annually from a $10-per-barrel surcharge assessed on oil companies. More importantly, the revenue is linked to a substantial shift in what transportation projects get funded. It’s the kind of thorough proposal, on both the revenue and spending sides of the equation, that Obama shied away from for most of his presidency. (It would only have stood a chance during his first two years in office.) While this Congress would never pass it, the proposal does lay down a marker for what smart federal transportation policy could be.

In a rough sketch laid out by the White House yesterday of the upcoming proposal, Obama calls for major increases in transit funding and investing in a network of efficient high-speed rail. Perhaps even more innovative is a $10 billion program to reduce carbon emissions from the transportation sector. This program, among other things, would fund states to better coordinate housing and job development with transportation. Obama’s proposal also calls for $2 billion to support research and development and the implementation of autonomous vehicles.

Not surprisingly, what has gotten the most press is the oil tax, which even Obama admits would likely be passed on to consumers through higher gas prices. Already, Republican Congressional leaders have called the proposal “DOA.”

Obama’s people have acknowledged the bill faces long odds in Congress, describing it as a conversation starter. An unnamed administration official told Politico the plan would help shift the nation’s transportation policy out of the Eisenhower era.

“This is a new vision,” one “senior official” said. “We’re realistic about the near-term prospects in Congress, but we think this can change the debate.”

Likely to be glossed over by most coverage is the fact that Obama’s proposal would help people save over the long run by chipping away at car maintenance costs caused by poor road conditions and reducing the time Americans spend driving. It’s also important to note that the federal transportation program is currently funded thanks to budget gimmicks that can’t be sustained much longer.

Meanwhile, Tony Dutzik at the Frontier Group notes that even if this passes, the U.S. would still have by far the lowest fuel tax rate in the industrialized world (top chart).

Costra Samaras, a climate researcher at Carnegie Mellon, says that Obama’s $10-a-barrel proposal works out to a tax of about $23 per metric ton of greenhouse gas emissions, or “toward the low-ish end of the social cost of carbon.”

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Via Costra Samaras/Rand

According to Samaras, the social costs of driving add up to about $3.40 a gallon. The current federal gas tax is 18.4 cents per gallon. Obama’s proposal would likely add about 10 cents per gallon, Samaras says.

More details about Obama’s proposal should be available next week.

  • Bobberooni

    > An unnamed administration official told Politico the plan would
    > help shift the nation’s transportation policy out of the Eisenhower era.

    Actually, no… in the Eisenhower era, people understood that the gas tax is a user fee associated with road maintenance. Nowadays, people want their roads maintained for “free” — i.e. hidden away in the general budget — while they enjoy “cheap” gas at the pump.

    Obama’s proposal would be unlikely to bring dedicated road funding back to even what it was in the Eisenhower era.

  • tomwest

    If gas tax hads been index-linked in 1993 (when it was last raised), it would be 30c/gallon now, not 18.4c/gallon.

  • Alexander Vucelic

    better solution Is Eliminate subsidies for oil industry and privatize the interstates.

  • reasonableexplanation

    Though the Federal gas tax has been fixed since 1993, the state gasoline taxes have gone up in most places since then. Most states are in the 50c-ish range per gallon at the moment, on top of the federal tax.

  • Joe R.

    If you apply that $3.40 per gallon estimate of external costs you come up with pretty interesting numbers. If the average American drives 13,476 miles per year ( http://cars.lovetoknow.com/about-cars/how-many-miles-do-americans-drive-per-year ), and their cars average 17.2 mpg ( http://ns.umich.edu/new/releases/7138-fuel-efficiency-of-vehicles-on-the-road-little-progress-since-the-1920s ) that’s a $2,664 external cost per vehicle, or over $5K for an average household with two cars.

    Since this proposal is DOA anyway, why didn’t Obama at least ask for a tax which would cover all the external costs? $200 per barrel sounds about right. It wouldn’t stand a chance of passing, but it might finally get people talking about the enormous costs of auto dependency. Right now those costs are the elephant in the room.

  • Michael

    Do you have any examples of successfully privatized interstates in the U.S.? I admittedly am a bit ignorant on this topic, but I do know that the privatization of the Chicago Skyway and the Indiana Tollroad indicate that this is much easier said than (successfully) done.

  • reasonableexplanation

    I clicked through the link provided by the chart above, and it links to a report advocating self driving cars, which has the same chart, but with costs per mile, as opposed to per gallon, based on a 24.8mpg car. (it’s on page 41).

    ‘Oil security’ is actually ‘oil imports’ on the source chart. I’m not sure if that’s applicable anymore, given our domestic overproduction. (We’re actually running out of places to store all the excess oil right now).

    Pollution and climate change are given as 1.9c, and 2.3c/mile, respectively.

    Congestion is a weird one, as in real life it’s more of a binary thing than a linear thing: until you get some critical mass of cars on the road, there’s no congestion, and each additional car has ‘no’ cost. At some point however, you cross the threshold and you get traffic. Either way, congestion is best handled via congestion charges, not through a per gallon or per mile tax.

    Accidents are at 2.4c, and as the report shows, are decreasing every year, and will eventually approach zero wit hthe implementation of driverless cars. Noise 0.1c,

    So leaving congestion and oil imports out of it, we get a $1.66/gallon externality tax. (Note, leaving everything in you get $3.24/gallon, not 3.40; I don’t know why the chart in this article is off).

    So, out of those externalities, oil imports solved themselves, pollution and climate change we’re taking care of using CAFE standards and EPA regulations (getting stricter all the time). Congestion should be dealt with where/when it’s a problem, Accidents will be decreased by better tech. Overall, I’m optimistic!

  • Alexander Vucelic

    successful ?

    I’d define succesful as eliminating the burden. Interstates are a massive drain on taxpayers.

    Better to gube ’em away to some Crony and let drivers finally pay the full cost of the highways. Might Be nice to Collect property taces on them also

    Tolls are a wonderful thing

  • Joe R.

    In my opinion self-driving cars, while not a panacea, will change a lot of things for the better. The model of car ownership will go down the toilet since you’ll be able to call up a car (and pay for it) only as needed. End result is the need for parking will drop dramatically. That can only benefit cities. The driverless cars will be pretty much fully utilized throughout the day, so they won’t need parking either, only loading zones. At night they could just drive themselves someplace fairly remote and park there.

    Once most cars are fleet vehicles, simple economics should take care of the pollution problem. In fact, they’ll probably want to go to electric from the start since TCO is lowest, even if initial purchase price might be a little higher. EVs are not an issue for a fleet operation. When one vehicle is running low on charge, it finishes the last trip, takes itself out of service, and drives itself to a charging station. So you have mostly EVs. That means the need for gas stations in NYC mostly disappears. Again, that’s good because you end up with more land, and gas stations really aren’t desirable businesses to have around.

    Obviously the need for the DMV, road policing, and a legal framework to deal with collision damage is gone. Again, a big plus.

    The major downside I’m seeing here is will we start configuring our streets just so these self-driving cars can get around quicker? Or will we restrict them to ~20 mph on most surface streets? And will self-driving cars lead to more sprawl?

    I’m somewhat optimistic but less so than you. I think any city as large and as dense as NYC needs a viable subway system. If nothing else, a subway serves as a redundant second network mostly immune to weather.

  • Michael

    That’s a good point, but each of those deals mentioned undervalued the asset to make a deal palatable to investors. Privatization deals like that sell the future to pay for today. I agree that drivers need to start shouldering the cost of infrastructure if they want to continue their lifestyle, but I haven’t seen any examples of road privatization working.

  • Michael

    Although I guess both the Skyway and the Indiana Toll Road have completely redundant free routes, so they’re not as elastic as other routes without redundancies would be.

  • SFnative74

    Oil has never been cheaper. To not adjust the gas tax now for inflation (via a surcharge or whatever) seems ridiculous. But if a compromise is needed, how about a surcharge that slides according to the cost of oil? As the cost of oil rises, the surcharge drops in cost. This still adds some revenue needed to keep infrastructure in good shape while reducing the swings in gas prices.

  • Sorry, not remotely in the ballpark. Pennsylvania is the only state with a 51.6¢ tax. The average is 30¢. http://taxfoundation.org/blog/how-high-are-gas-taxes-your-state

  • reasonableexplanation

    Hmm, I’m seeing different info:
    http://www.api.org/Oil-and-Natural-Gas-Overview/Industry-Economics/Fuel-Taxes/Gasoline-Tax

    they have the average at 48c.

    Edit: Ah! Looks like my map just includes the federal tax! Makes sense.

  • Alexander Vucelic

    Its usually because the buyers get all sorts of guarantee and Crony favour ing rules plus they end uo being heavily regulator and the final death is DRIVERS are always too cheap to pay the real economic cost of using the interstate.

    But Even these ‘failed provatizatikne are better than tax taxpayers having an ever in reading burden.

  • Larry Littlefield

    Frankly, it’s a little offensive.

    Obama pandered by coming out against carbon taxes and other taxes on energy use, starting out when he was a candidate. And didn’t do anything about infrastructure and fossil fuel dependency for eight years. You’d think that even climate change deniers would be upset about one side effect of cheap gas — the collapse of domestic fossil fuels production and more dependence on imports from the Middle East.

    https://larrylittlefield.wordpress.com/2014/10/08/update-oil-sugar-and-35-now-41-wasted-years/

    I though we’d get something better when, as a candidate, he did say that in the long run the only way to save money on oil is to use less oil.

    Now it’s time to leave the stage. No one is going to enact any of his priorities — that only lasted his first two years. It would be better for him to keep quiet during the campaign, the way other Presidents have, or push the candidates to align their own plans with reality for a change.

  • Larry Littlefield

    What if the private sector had built the interstates to begin with?

    Consider this. The greatest cost of the roads is the land they sit on, which was generally NOT paid for by gas taxes. That was the state and local responsibility. Private companies would have sought to limit that expense — by building fewer lanes and using them more intensively.

    Given the tolling technology available at the time the number of exits would have been fewer.

    Put it together and you’d get roads that were only used by buses, trucks, and the motor vehicles of the rich at peak hours. And thus communities that were tightly clustered around the limited number of exits. Just like the “railroad suburbs” that predated suburban sprawl — and are now the most valuable suburban communities.

  • Alexander Vucelic

    True

    and Those private interstates would be paying local property taxes

  • Deb Reed

    Sorry, but you can’t mention smart and congress at the same time…Unfortunately, they do not go together!!!

  • Alicia

    Here’s a complete list, assuming it’s up to date:

    https://en.wikipedia.org/wiki/Fuel_taxes_in_the_United_States#State_taxes

  • bud

    since a gallon of ethanol costs more than a gallon of gas to make and it reduces the miles per gallon an automobile can travel, why not eliminate it and use that money to fund alternative transportation?
    the last thing America needs right now is a surcharge on gasoline. the lower economic tier will get hit the hardest and they are the last that can afford it. Oil touches everything and forms the foundation for the building blocks of our lives. lower energy translates into more opportunities more jobs better health since many medicines are derived from oil. focus on ways to reduce oils cost per barrel- not increase it. may i suggest reading “oil-the Prize” by Daniel Yergin whose book is an outstanding review of oils influence on our world as we know it

  • High gas prices are actually the best thing that could happen to all sectors of society. When gas prices are high for sustained periods, this spurs change that increases mobility for all by improving public transit and bicycle infrastructure, thereby lessening the need for car ownership.

    Furthermore, high gas prices are good for local economies. These high prices drastically increase the cost of food shipped from afar; therefore the high cost of gasoline induces people to prioritise locally produced food. For the New York area, this would be a huge boon for local (mainly New Jersey) producers of milk, tomatoes, and other fruits and vegetables, as those producers would have the most densely-populated area of the country all to themselves.

  • 2wheeler

    All of those countries have exceptional public transpo (rail, bus). They are also all very small. I did an 8 day trip doing a loop around the top half of the UK and used a single tank of diesel. It is erroneous to compare our level of fuel tax to these countries. They don’t NEED to drive as much as we do, either locally or regionally.

  • Matt F

    Totally agree — If you add Canada and Australia to the chart, you’ll see our tax is close to other countries with spaces of vast emptiness…

    BTW, I’m still in favor of increasing the gas tax.

  • war_on_hugs

    It’s a catch-22, though. Without sustained investment, the US will never hope to compete with those countries in terms of public transportation and urban development. That investment has to be funded somehow, and a tax on gasoline (which is also socially desirable for other reasons e.g. environmental) is the most logical way to do it.

    For the past 7+ decades, we have systemically subsidized sprawl and auto-dependent communities. Obama’s plan wouldn’t change things overnight, but it would offer an incentive that would encourage more sustainable and accessible development patterns. And the point of the chart is that even this level of taxation would put us far below other countries.

  • 2wheeler

    Ironically, oil is cheap but gas is still expensive. Last time oil was this cheap gas was about $1.80/gallon in CA. It’s still about $2.80 here. If both CA and the fed get their gas tax increases it will be closer to $4/gallon. What’s gonna happen when the price of oil goes back up? The economy will get crushed. Unemployment will soar. Fun times…

  • thielges

    Most gas is consumed in local/regional commutes so “vast emptiness” isn’t really an explanation. Low density and lack of investment are.

    No-one commutes from Reno to Salt Lake City. But plenty commute from one side of Atlanta to the other. Though sprawling Atlanta’s transportation needs could be addressed by public transit. But limited public funds are invested in freeways instead.

  • neroden

    For reference, CHINA has a gas tax of roughly 95 cents per gallon. As of last January — it may have increased since then.

    http://news.xinhuanet.com/english/china/2015-01/12/c_133913905.htm

    The US gas tax is down at Saudi Arabia / Iran / Venezuela petrostate levels. It’s outlandish.

  • neroden

    Add China to the chart (95 cents per gallon). It has vast emptiness too.

    Canada’s gas tax is WAAAAAY higher than the US gas tax. For one thing, Canada charges full sales tax on gasoline, while most of the US exempts it from tax.

  • neroden

    Get off of oil. We’ve known since the First Oil Crisis in 1973 that we needed to get the economy off of oil so that it didn’t suffer when oil prices went up.

  • John Davis

    Private companies would not have built the interstate system. Maybe some roads on high volume routes. The interstate system was built to connect every city at that time of 100,000 or more and also for military reasons. It was the right program at that time. The only way to have had private companies built it would have been massive land grants comparable to the Transcontinental Railroad which was only a good deal because no one really owned the land. Even then the government and investors got ripped off.

  • Alexander Vucelic

    thank you for arguing that most of the interstate system is a uneconomic waste of scare resources

  • John Davis

    I see you cannot comprehend what I wrote. That private companies would have built the entire interstate system as it exist today is ludicrous. And then pay taxes which are added to the tolls. How could the average person afford to tour the USA. Take old Route 40 all the way across. OH right, our tax payer money would have instead been invested to turn old US 40 or 50 and the others into what, oh an interstate system that doesn’t pay taxes.

  • Alexander Vucelic

    why do drivers refuse to pay the full cost of the interstate system ? why do drivers demand to be lavishly subsidized ?

  • John Davis

    I’ve been all for raising taxes on gas especially now when price are low. You have have me mixed up with someone else because gas taxes were not what you and I were talking about.